U.N. says more accountability needed on Afghanistan's Kabulbank scandal

Reuters News
Posted: Jun 13, 2013 6:51 PM
U.N. says more accountability needed on Afghanistan's Kabulbank scandal

By Michelle Nichols

UNITED NATIONS (Reuters) - More people must be held accountable for the 2010 collapse of Afghanistan's Kabulbank and robust action on asset recovery and financial regulation is essential to ease foreign donor worries and ensure continued aid, the United Nations said on Thursday.

An Afghan court sentenced 20 men in March, including the bank's founder and chief executive, to between four and five years in jail after $935 million was stolen from what was then the country's biggest bank.

In a report to the U.N. Security Council, U.N. Secretary-General Ban Ki-moon described those sentences as "relatively light" and said the convictions "must not signal the end of accountability in this scandal."

The collapse of Kabulbank triggered a financial crisis, civil disorder and a run on deposits, worrying foreign donors and embarrassing the U.S. and Afghan governments, which had touted the bank's credentials as a modern lender integral to developing a tiny economy crippled by war and mismanagement.

The government was force to bail out Kabulbank, which was later relaunched as the state-run New Kabul Bank.

"Robust and ongoing action, particularly asset recovery and sound financial regulation, are essential," the U.N. report said. "Demonstration of commitment to sound institutional and financial fundamentals will be critical to ensuring sustained international assistance."

The court case was viewed as a crucial barometer of Afghanistan's commitment to stabilizing the economy, less than two years before the withdrawal of most foreign troops that have been in the country since 2001.

Brothers of President Hamid Karzai and his first vice president, Mohammad Qasim Fahim, who were both Kabulbank shareholders, were spared jail sentences after a presidential decree last year granted immunity to those who returned funds.

"Corruption and the illicit economy - including a rise in poppy cultivation for the third year running - are chronic and debilitating to inclusive growth and, ultimately, donor interest," the U.N. report said.

Opium cultivation in Afghanistan is at a higher level than during Taliban rule despite efforts by the government and international forces to combat the trade, the United Nations said last month in the Afghanistan Opium Risk Assessment 2013.

High prices for opium, from which heroin is made, are encouraging farmers to grow poppies, it said.

U.S.-backed Afghan forces toppled the Taliban in late 2001 for refusing to hand over al Qaeda leader Osama bin Laden after the September 11, 2001, attacks on the United States.

(Editing by Lisa Shumaker)